Blackwater's Days in Iraq Might be Numbered

The controversial security firm Blackwater may have to cease its operations in Iraq come Jan. 1, 2009. Despite four separate federal grand jury investigations of its operations, Blackwater has continued to provide security services for the U.S. State Department.

But now the department is exploring contingency plans in the event the Iraqi government denies Blackwater the ability to work in Iraq beginning Jan. 1, when only licensed security contractors will be allowed to operate in Iraq. Blackwater has never had a license to operate there.

Ultimately, the State Department has plans to replace all of its private security contractors with a new security force to protect its diplomats in both Iraq and Afghanistan. The effort to hire and train this large a force could take years to accomplish.

Numerous officials tell ABCNews.com that the State Department has approved a long-term contingency plan to hire as many as 800 security personnel to ultimately replace its private security contractors. These "Security Protection Specialists" would receive limited immunity because they would be State Department employees. They will not be considered Diplomatic Security agents because they will not have arrest powers and will not be investigators.

Initially, 50 people will be hired as Security Protection Specialists to run the security details and provide convoy protection, but that number could rise to as many as 800 as they replace all contractor personnel in the coming years.

ABCNews.com has learned that until this force becomes a reailty, the State Department has developed contingency plans that could mean that many ex-Blackwater contractors currently in Iraq could be absorbed into Dyncorps and Triple Canopy, the two other private security companies working for the State Department. This arrangement would fill the gap until the Department hires and trains its new force of Security Protection Specialists who would work in Iraq and Afghanistan.

Blackwater's contract expires next year, but it could effectively cease their operations in January because, unlike its competitors, the company has always operated in Iraq without a license. The new Strategic Forces Agreement with Iraq mandates that, as of Jan. 1, only security contractors with a license will be allowed to operate in Iraq.

State Department Says Determination of Blackwater's Status Should Follow Criminal Investigation of Guards

In a new report sent to Congress this week, the State Department's Inspector General revalidated a recommendation by a State Department panel last year that said the U.S. Embassy in Baghdad should determine whether Blackwater should continue as the main private security contractor for American diplomats in Iraq when the contract expires at the end of next year.

However, the recommendation stated that the determination could only take place after the FBI concluded its investigation into the Nisour Square shooting incident in Sept. 2007 where 17 Iraqis were killed in by Blackwater guards. Five of the guards were recently indicted on federal manslaughter charges as a result of that incident, but the State Department said today that the FBI investigation remains open.

In a statement, Senators John Kerry (D-MA), incoming Chairman of the Foreign Relations Committee, and Bob Casey (D-PA) urged the State Department to drop Blackwater as a private security contractor citing the Inspector General report that "raised the concern that the Iraqi government may remove Blackwater's license to operate inside Iraq."

Ultimately the decision to renew the contract will be left to the Obama administration, but it may not matter anyway as the SOFA requirement requiring only licensed security contractors in Iraq will effectively mean that unless the Iraqi government grants a waiver, Blackwater will be prevented from operating in Iraq beginning Jan. 1.

Officials from all three companies met with State Department officials last month to discuss how their operations would be affected by the new SOFA agreement. At the meeting, Blackwater Worldwide was told it would not be able to continue to operate without a license. There was a discussion of the State Department possibly asking the Iraqi government to give Blackwater a waiver on the license, but it was unclear if the Iraqis would go along with such a request. Calls to Triple Canopy were returned, but all questions about the meeting were referred to the State Department.

Monitoring of Blackwater Staff Increases

Shortly after the shooting, the State Department followed interim recommendations made by the review panel that increased the monitoring of Blackwater employees, which led to the installation of video cameras in their vehicles and the assigning of Diplomatic Security agents in every security convoy escorted by company guards.